InvestorsObserver - Educate. Inform. Empower. Special Report

18 Warning Signs That Tell You When To Dump A Stock

It’s usually hard for individual investors to sell stocks
in order to take profits or cut losses. There is often a haunting
voice that whispers, “Not right now… maybe in a few
days, maybe a couple of weeks, maybe next month.”

This is especially true of stocks owned over a longer period of
time. We can become attached like old friends and are reluctant to
say goodbye even if they aren’t stocks we’d be likely
to jump in on today.

But there is no reason to get sentimental about your holdings.
Your stocks don’t cry when you’re gone; stocks have no
emotions toward us and we must remain dispassionate about them too.
When it’s time to dump a stock, push the button and get rid
of it—with today’s modern platforms it’s actually
an amazingly quick and clean process to “execute” that
sale with the ruthless, pitiless eye of a trained assassin.

Unfortunately for many investors, selling a stock is emotional
not logical or analytical. Less pragmatic investors make
stock-selling decisions with their sensitive feeling heart instead
of their calculating, no-nonsense brain.

For example, if a stock has been falling, some want to hold on
with the mushy hope of giving it a chance to recover. Or, maybe
they hold on because romantic machismo won’t allow them to
admit to a loss. On the other hand, if a stock has risen since
they bought it, some become intoxicated by the rush of the rise
and want to hold it wishing it will continue to an even higher
high.

As an investor, always keep this hard truth in mind: the
only way to actually make money on a stock is to sell it.

Often times selling a bad stock so you can buy a better one is
the smartest play you can make. Riding up with the new stock is
better than hoping to recoup losses on an older, more tired one.
The key is to get out of falling stocks before they drop further.
Of course we should hold onto the ones that truly have promise but
the trick is to be very businesslike in our decisions about which
is has promise and which needs to be jettisoned.

If you find yourself reluctant to sell a particular stock,
look in the mirror and ask yourself a few simple questions:

Am I attached for the wrong reason? Is it visceral?
Nostalgic? Sentimental?

Am I refusing to admit I made a bad investment?

Is something irrational holding me to this stock?
(I dig the CEO, use the product or like the company logo)

Do I find myself rationalizing or making excuses for its
performance?

Is my holding on to this stock in any way
emotional?

The hard part is to understand when to sell that stock we love.
What is the right time to say goodbye? Are there signs?

How will I know?

18 Warning Signs That Tell You When To Dump A Stock

As you go through these warning signs, check off the tests that
your stock does not pass. By breaking down the way you look at your
stock into a list like this you should be able to take the emotion
out of the decision.

This is not a short checklist you can run through in ten seconds.
You will need to do some research at some reputable investment
resources to get the answers you need to determine if your stock
meets the checklist criteria. But we’ve done a chunk of the
work for you by providing links to almost all of the information
you’ll need.

Included in this report are convenient links to free investment
resources to get the answers you need to determine if your stock
meets the checklist criteria. For most of the links below, after
you enter you symbol on our page, you will not need to enter the
stock symbol again. Be sure to go through our checklist for every
stock you own.

Enter Your Stock Ticker to Customize this Report

You are able to access this resource as often as you wish simply BOOKMARK the page on your computer.

Special Report:

1. When a stock’s price drops 10% to 15% from a recent high

Take a quick look at the past year’s chart for your
stock.

The last price and 52-week price range are usually shown with
the chart.

Most online stock charts allow you to compare multiple stocks at
once. Add the other companies in the sector or industry to the chart
using the compare tool to look at those stock’s charts and see
if those competitors show a similar pattern.

If your company is ranked in the top part of the Sector
and/or Industry, great.

If not, look out.

If the sector/industry growth rates are below 10% or 12%,
that too could be a sign of trouble.

6. The company has cut its dividend

Dividend stocks are hard to get rid of because you get a
nice periodic cash gift from the company. But if the company
has dropped that dividend even a few pennies then it is
probably time to drop that company.

Look at the list of the recent dividends paid by the
company.

Be sure to check for stock splits. It may sometimes appear
that a company has reduced its dividend, but if they did a
stock split, the dividend rate per share will go down but
the overall dividend yield will be the same or possibly even
go up.

7. A key executive leaves—and the new manager
seems lost

If the leadership of a company can’t clearly
articulate the vision for company growth and profitability,
is reluctant to make needed changes, or is from a totally
different industry, trouble could be brewing.

18. A strange new product

Too many new product announcements could also be a danger
sign that the company is just throwing stuff against the wall
and seeing if anything sticks.

Conclusion

If your stock has more than a few of these warning signs you
need to ask yourself why you’re holding onto the shares?

Don’t fall for the cocktail party stories about the
stock that came back from the ashes—most of them are BS. For
every stock that comes back there are many more that continue on
their descent. People at cocktail parties rarely talk about the
stocks that lost money.

Hopefully, if you absorb some of this checklist in your process
of analyzing your stock holdings you will avoid the
“big” losses. Although not as sexy, your stories will
be about the stocks you sold before they tanked and those stories
can be as sweet to brag about as the big winners.

Don’t forget… You can always sell the stock now,
watch it drop then buy it back at a lower price.

You may use this resource as often as you wish, simply BOOKMARK the page on your computer now.

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